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Why Does Car Insurance Increase So Much After a Claim?

While filing a claim isn’t the only factor that can cause your car insurance to increase, it’s one of the most common and decisive factors. But why does this happen and what should you do about it?

Thankfully we have all the answers for you. Here we’ll look at why car insurance premiums increase after a claim and what else can affect your premiums. Let’s get started!

Why Does Car Insurance Increase So Much After a Claim?

The simple answer is that your insurer will view you as high risk. This means that, because you’ve made one claim, you’re more likely to make another. In their view, they are financially protecting themselves against the higher likelihood of making a claim.

While this is the simple answer, there is a lot of other factors that go into the payments you’ll pay. Read on as we’ll look into more detail about why premiums can increase.

What Happens When You File a Claim in Case of an Accident

Despite your previous history, current coverage and every other factor, accidents can happen to anyone. And when they do, you’ll need to make a claim. This is a dreaded time for most car owners as they’re all wondering whether insurance rates will increase afterward.

However, the fact that you had to file a claim doesn’t automatically mean that your insurance rates will be affected. At first, your insurer will open an investigation of who is at fault for the suffered damage or loss.

In case of a collision with another vehicle, you can be found not at fault, partially at fault, or at fault of an accident. If you have comprehensive coverage, the insurance company will determine whether the cause is covered by your policy.

What Happens After the Investigation?

If you’re involved in a collision and determined not to be at fault, this will not raise your insurance rates. For example, if you’re rear-ended simply because you were at the wrong place at the wrong time (e.g. when you’re stopped at a red light and the vehicle behind you didn’t stop in time), your insurer won’t increase your premiums upon renewal.

On the other hand, if you’re deemed at fault for the accident (whether fully or partially), your insurer will consider you a high-risk driver and raise your monthly premiums. Depending on the scope of the incident, the province where you live, and your insurer’s policy, your rates can remain higher up to six years after filing the claim.

If this happens, you can look into other insurance provider quotes, but because the claim remains on your driving record, you might not fare better with those either. That being said, some providers are more forgiving, especially if you were only partially responsible (typically less than 25%) for a minor accident.

In some provinces, if your role in the collision was minimal, insurance companies aren’t allowed to factor it in when determining your premium rates.

after the investigation

How Does Accidental Forgiveness Endorsement Affect Your Car Insurance

If your policy has an accidental forgiveness endorsement, your premiums are unlikely to increase after a claim, even if you were at fault in an accident. However, this only applies to the first at-fault collisions.

Additionally, it may not be available to you if you were deemed culpable of an accident within the last six years. Many see this as pointless as this is an add-on you must buy on top of the regular policy and costs more, therefore negates the positive of potentially lower premiums in the future.

Another critical thing to remember is that while your insurer might not raise your premiums after an at-fault accident if you have an accident forgiveness endorsement, the claim remains on your driving record.

If you switch insurers, your new insurance company will likely give you an increased rate based on this “risk,” represented by being at fault at a previous collision. If you file a claim for a second at-fault accident in the same or other insurance company, the endorsement will no longer protect you and your premiums will go up.

How Do Claims for Non-Collisions Affect Your Insurance Rates?

As claims related to fire, theft, vandalism and other non-collision-related damages or losses have nothing to do with your driving abilities, they’re unlikely to affect your insurance premiums.

However, if you file too many of these claims, you might be deemed at a higher risk, so this could raise your rates. Likewise, if the loss or damage was caused by your negligence or by someone from your household, you might see an increase in monthly premiums, even if you have comprehensive coverage.

Another exemption is the windshield replacement. The first claim for replacing an accidentally cracked windshield will unlikely affect your insurance rates, but if it keeps happening, your insurer might raise your insurance or exclude this coverage.

insurance rates

Final Thoughts

As you can see, filing an insurance claim doesn’t automatically mean your premiums will increase upon renewal or when buying a new policy. However, if you’re in an at-fault accident or make several non-collision claims, your premium is highly likely to increase.

There is sadly little you can do change your driving record but it’s a great idea to shop around if you’re unhappy with your new quote. If you are looking for auto insurance or just need some advice, contact Marathon Insurance today and we’ll love to see how we can help.

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